Ministry of Housing and Urban Poverty Alleviation wherein the government has
notified the major sections of Real Estate (Regulation and Development) Act,
2016 (RERA) which shall come into force w.e.f. 1st May, 2017. While
the deadline for the RERA implementation is almost there, many of the State
Governments are still under the process to notify their versions of rules and
bring in legislation for the same. Implementation of RERA is important as it is
seen that regulators play a key role in removing unscrupulous players,
promoting fair and healthy competition and instill confidence in buyers, all of
which ensure the growth of real estate.
“The much-awaited Real Estate Act has come into force
from May 1st, 2017 but only 13 states and Union Territories have so
far notified rules under the Act. The Real Estate (Regulation and Development)
Bill, 2016 was passed by Parliament in March last year and all the 92 sections
of the Act come into effect from May 1. ”
sections in the Act have now been notified and states can now appoint both the
regulatory and the appellate authorities. While the deadline was on May 01,
only a handful of states have so far notified their versions of RERA. The main
intention behind RERA is to increase transparency and bring in standardization
into real estate industry and amongst various stakeholders including buyers,
developers, brokers and investors.
under RERA –
will make it mandatory for all commercial and residential real estate projects
where the land area is over 500 sq. mt or eight apartments to be registered
with the regulator before launching of these projects. Under RERA, builders and
agents will have to register themselves with the regulator
will be able to sell projects only after the necessary clearances are obtained.
enable informed decisions by buyers, Real Estate Regulatory Authorities will
ensure publication on their websites information relating to profile and track
record of promoters, details of litigations, advertisement and prospectus issued
about the project, details of apartments, plots and garages, registered agents
and consultants, development plan, financial details of the promoters, status
of approvals and projects etc.
seeks to impose strict regulations on the promoter and ensure that construction
is completed on time.
clarity provided for Carpet Area. It has now been clearly defined in the bill
to include usable spaces like kitchen and toilets.
to put 70% of the money collected from a buyer in a separate account to meet
the construction cost of the project for which the monies are being collected.
developers’ liability to repair structural defects has been increased to 5
years from the earlier 2 years.
enable quick settlement of disputes under RERA, each state to setup appellate
tribunals to solve disputes between buyer and builder within 120 days.
buyer will pay only for the carpet area (area with walls). The builder can’t
charge for the super built-up-Area, as is the practice at present.
builders will also benefit from the RERA, as it proposes to impose penalty on
allottee for not paying dues on time. With this the builders are also given an
opportunity to approach the regulator in case there is any issue with the
buyer. At the same time heavy penalties are also being imposed if builders do
not honour their commitment or fail to register themselves with the regulator.
In short, RERA will ensure that fly by night developers go out of business
while only those survive and flourish who have the ability to develop and
deliver while acting under the rules of engagement defined by RERA. However, as
a fallout of such, the prices of real estate may increase for the buyer because
to launch a project, a developer will have to provide for the land as well as all
permissions before launching a project as opposed to what has been the norm so
may lead to fewer new launches initially as the industry adjusts to it. However
established brands who were already in conformity would not be impacted and
will benefit from healthier competition. As the trust deficit in the sector
reduces, projects of reputed developers may experience increased demand. Thus a
developer who manages an efficient development cycle and builds trust with the
customer, will create a solid differentiator in the market place.
perspective of the home buyers, the RERA regime will instill more confidence in
the mind of homebuyers with respect to three key elements: First, product,
which includes specifications of apartment, building and overall project;
Second, price i.e. total amount payable, timing of payment, and penalty for
both buyer and developer due to delay; and last, completion time for delivery
of apartment and project. From the perspective of real estate developers,
meticulous and complete planning with regards to the product design, approvals
and resources before launch of any project will become mandatory and a key
differentiator for success under RERA.
will be a strong requirement for developers to tie up the required finances
before they start sales of units, and this is where institutional capital will
play a key role. The amount of housing required in India is so huge that formal
funding of the industry will grow many folds in next few years. Private Equity
players, NBFCs and banks will have higher confidence to provide capital to
developers since all the necessary permits will be in place and completion of a
project in committed time period will become a norm rather than exception. The
implementation of RERA would require thorough reassessment of risk viz.
business, regulatory, market and operational amongst the developer fraternity.
This may result in lower cost of equity as well as debt for real estate
has been enacted primarily to bring in transparency and efficiency in the real
estate market by making the environment conducive towards buyers. The Act
brings in a number of parameters to control and streamline real estate projects.”
RERA is being hailed as signifying the dawn of a new era for the Indian real
estate sector and a possible panacea to all that ails the real estate
industry, there are still a number of
lacunae which may need to be addressed soon, viz., what happens to banks and
lenders’ charge on the 70% collection in the designated account?; what kind of
cover would the investors look at now that at least 70% of the cash flows in
the projects are being held back and can be utilized only for the project construction?;
What happens to the delays which are beyond the control of the developers –
e.g., government regulatory bodies not giving permissions et al?; What happens
when the government is implementing a project through its own agencies like
DDA, HUDA, MHADA?; how will the regulatory body, appointed by the government
adjudicate when the government itself is a party to the dispute? And many more
has come into effect with an assurance to protect the right of consumers.. It
is basically a consumer – centric act where the government has tried to portray
consumer as the king. Nonetheless, the real estate developers have also
welcomed the implementation of the Act, saying it will bring a paradigm shift
in the way the Indian real estate sector functions. This move of the government
has brought in the legislation to protect home buyers and encourage genuine
being a central Act, does not need to be passed separately by states. However,
land being a state matter, various operational rules and clauses for
implementing the Act are to be formulated and notified by state governments.
Each state has to appoint regulatory authorities to oversee implementation of
land is a State subject under the Constitution, even after the Centre enacts
the legislation, State governments will have to ratify them. States will have
to set up the Real Estate Regulatory Authority’s (RERA) and the Real Estate
Appellate Tribunals and have only a maximum of a year from the coming into
effect of the Act to do so.
states and UTs that have notified the rules are Uttar Pradesh, Gujarat, Odisha,
Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar. The housing ministry had
last year notified the rules for five UTs—Andaman and Nicobar Islands,
Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, while the
urban development ministry came out with such rules for the National Capital
Region of Delhi.
the federal law is a an umbrella guideline, each state has the right to enact
its own regulations staying within the parameters of the federal law. A few
states and UTs have circulated their draft with only Maharashtra leading the
states with its own version of RERA already notifies.”
far, only 13 states and Union territories have notified the new rules, of which
only three states—Maharashtra, Madhya Pradesh and Rajasthan—have appointed a
housing regulator. Besides, none of the states apart from Maharashtra has set
up a website where developers and brokers can register or apply for new
projects under the new Act.
the benefit of any statute is contingent on its effective implementation.
Despite a model set of rules, only a few States have notified their rules. The
onus is now on States to formulate rules and establish the regulatory
authorities on time. There shouldn’t be just paper compliance, by designating
an existing authority to take additional charge as the real estate regulator,
as that would affect the timeliness prescribed under the Act.
brief, the new legislation is a welcome enactment. It will go a long way in
assisting developers and customers. More importantly, it will ease the burden
on innocent home buyers who put their life’s savings into a real estate
investment in the hope of having a roof over their head but often find their
dreams come tumbling down.